Transitional lease – variation to increase rent
Example:
A 15 year lease with an annual rent of £50,000 was executed on 1 September 2014. An SDLT return was submitted and resultant tax paid.
On 1 September 2015, a minute of variation was executed to increase the rent from £50,000 to £75,000 per annum from the date of execution of the minute. This is treated as the grant of a new lease under Article 12 of The Land and Buildings Transaction Tax (Transitional Provisions) (Scotland) Order 2014.
The effective date will be the date the minute of variation was executed, 1 September 2015. An LBTT return is required by the filing date of 1 October 2015.
The chargeable consideration will be all of the additional rent payable in the remaining years of the lease.
The net present value (NPV) is calculated using the additional £25,000 payable in each of the 14 remaining years. This results in a NPV of £273,013.01.
Using the rates and band for leases, the total tax chargeable would be:
(£150,000 x 0%)+(£123,013.01 x 1%) = £1,230.
The date of the first three yearly review will be the third anniversary of the effective date of the transaction, 1 September 2018. This return must be made to us by the filing date of 1 October 2018.
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